October 14, 2011

A Farewell Tribute to Employee-Owned BNA

Let me make it clear from the outset: with its sale to Bloomberg, BNA will not just survive; it will thrive. BNA's employees will have more security and opportunity with Bloomberg... surely more that they would have enjoyed had one of BNA’s existing competitors purchased the company instead. Hats off to BNA's top management and board of directors for pulling off this result!

Nonetheless, I'm still a little sad to see BNA's tenure as the nation's oldest 100% employee-owned organization come to an end. So, in a fond farewell, here’s a brief recap of the company’s early years.

BNA's Origins
Much of what follows is taken from the book Making Employee Ownership Work, by John D. Stewart. BNA's first executive editor and later its CEO, John played a key role in launching BNA as an independent, employee-owned company on January 2, 1947.

 In 1929, David Lawrence -- founder, publisher, and owner of The United States News Publishing Company (today's US News & World Report) -- created the Bureau of National Affairs (BNA) as a subsidiary to publish bound volumes of patent, trademark, and copyright decisions. It also published US Law Week, which covered the courts and regulatory agencies.

A third service -- Labor Relations Reporter (LRR) -- was launched on Labor Day, 1937, a few months after the U.S. Supreme Court upheld the constitutionality of the National Labor Relations or Wagner Act. LLR was the first in a series of "labor services" that gave BNA a preeminence it has never lost in reporting developments in "human resources." (I was hired by John Stewart in 1955 to work on LRR, just where he had started in June, 1939.)

BNA's concept -- information services with small circulations and high prices -- grew out of a conversation David Lawrence had on a train to New York with his old friend Adolph Ochs, then publisher of The New York Times. Talking about Lawrence's dream of starting a national newspaper covering Congress and regulatory agencies, Ochs said:
Dave, you have a great idea. There's clearly a need for the information you're providing. But it's not an advertising medium. There aren't enough people who need that kind of reporting in depth to provide an advertising base. But the people who do need it will pay enough to support you without advertising.
Stewart got this advice from John Taylor, the LRR managing editor who hired him:
Just keep in mind that nobody is going to read what you write because he wants to. He's reading it because he has to. All he wants is the facts. If you can serve them up in a way they can be digested easily, that's fine. But don't strain yourself trying to write deathless prose.
1946 and the Lead-up to Employee-Owned BNA
I've always been fascinated with this story, which in so many ways reflects what was going on in the county after the war.

BNA made a boatload of money during WWII. Its most spectacular service was Price and Production Controls (P&P), a loose-leaf, fully indexed service reporting every detail about price controls and industrial production during the war. The publication was so essential to the war effort that it received an unlimited paper quota during that time of shortage. It made BNA the largest private user of airmail and special delivery. By the war’s end, its contents filled 129 loose-leaf binders.

While others printers in town were constrained by paper rations, Lawrence's typesetters were working 50 and 60 hours a week. They weren't popular with their fellow union members, many of whom were working part-time, or on layoff. In February, 1946, when contract negotiations with the International Typographical Union (ITU) broke down, the local union voted not to strike, but to abstain from working overtime. This decision forced DL (as Lawrence was known) to close down P&P, which he had kept going by offering weekly subscriptions at ever-increasing prices as circulation dwindled.

DL was never a flaming liberal, but he kept an open mind on unions until the ITU did him in. He soon put his printing company up for sale, and found a buyer in Walter McArdle, the production manager.

Meanwhile, the American Newspaper Guild was organizing BNA's editorial department, capitalizing on the insecurity of many editors whose jobs on war-time publications were in jeopardy. The Guild capitalized on DL's insistence that the women editors hired during the war be identified only by the initials of their first names, while men were identified fully. John Smith was listed as John Smith, but Jane Doe was listed as J. Doe.

It didn't help when DL held a meeting at a hotel to introduce the staff of his new World Report to the staffs of US News and BNA -- and didn't invite the female editors.

Within a week, the Newspaper Guild filed a petition for an election in a unit made up of BNA's editorial department. The petition was backed up by authorization cards from virtually all the women editors and a majority of the men. DL's lawyers countered that the only appropriate unit was one made up of the editorial departments of both BNA and US News.

That's how things stood on a Saturday morning in October when DL, unable to reach BNA's editor-in-chief Dean Dinwoodey, called John Stewart (managing editor for labor services) and asked him to round up Dinwoodey, Adolph Magidson (BNA's associate editor for legal services), John Taylor (managing editor of LRR), and Ed Donnel (managing editor of Daily Labor Report). DL wanted the group to drive out to his farm in suburban Virginia for a meeting.

With little preamble, DL proposed that they buy BNA. The terms: a total purchase price of $600,000 with $10,000 down, the balance payable in installments over eight years. They would also assume liability for fulfilling the $1.5 million in pre-paid subscriptions. This amount was carried on US News' books as deferred income, and getting rid of it would dramatically improve its balance sheet. (BNA later wrote down this liability significantly to reflect the discontinuation of some war-time publications.)

DL showed the five no figures, and John didn't recall their asking many financial questions. John explains:
We were editors, not accountants. We knew without asking that the business was losing money, with half a dozen services that had lost their reason for being when the war ended. But we also knew that, once the deadwood was cleared, there remained some solid services with a loyal cadre of subscribers.
John continues:
Later, no one was quite sure who first proposed that we give everyone at BNA an equal chance to invest in the business. And to this day, no one can tell you whether we agreed to that idea because we were idealists or because we were chicken, looking to spread the risk. In any case, before we broke up that evening, we had determined to open up ownership of the new BNA to all employees."
BNA managers and supervisors were asked to submit anonymously the amount they’d consider investing in the new company. To the disappointment of the founding five, the total was less than $100,000. Still, that was enough working capital, since subscribers paid up before they received products.

John sums up the morals of the story like this:
  • Never underestimate the power of a woman.
  • Don't look a gift horse in the mouth.
  • Sometimes it's better to trust your instinct than to worry about not having a lot of figures.
BNA Survives . . .
In its first year of operation, BNA lost $21,500; at midyear the loss had been as high as $75,000. In February of that first year, Dean Dinwoodey, now BNA's president, called in the eight members of BNA's first board of directors and proposed that everyone take a 10 percent cut in pay. Dean's salary at the time was $25,000 a year. John -- second in command – earned $12,500. Dean withdrew his salary-cut proposal when it became clear that it didn't have much support. (A year later, it came to light that Dean had directed accounting to cut his salary by 20 percent to $20,000.)

In March 1947, a conservative Congress passed the National Labor Relations (Taft-Hartley) Act, which imposed some unions sanctions. John describes the dilemma faced by the new cash-strapped BNA: "Should we throw our resources into producing a book on spec to get a jump on our competitors or should we wait to see whether the unions, with help from President Truman, could dodge the bullet?"

Dean agreed to proceed full-steam ahead. When Congress voted to override Truman's veto on June 23. BNA printed its new book, The New Labor Law, and presented a bound copy to Senator Taft. The book sold 10,000 copies – a bestseller for that kind of opus, and a great shot in the arm for BNA's finances and morale.

Dean made an even more dramatic decision in 1949. BNA had developed a service during WWII -- the Manual of Labor Supervision, a loose-leaf service designed for supervisors. This new product found only a small niche audience in personnel offices. And in 1949, it was being clobbered by other services, especially the Labor Coordinator published by BNA's competitor RIA.

Dean authorized a $100,000 renovation for this service that many considered a lost cause. And the company’s net profit in 1949 was a mere $6,302!

BNA brought in its five best and brightest sales representatives and sequestered them in a suburban motel with instructions to come up with a blueprint to turn the Manual of Labor Supervision into a money-making product. They recommended a service remarkably similar to RIA's and renamed it Labor Policy and Practice. Debuting in early 1950, it was a huge success, and the Korean War emergency fueled demand. The sales reps loved promoting the product, especially since they thought it was their baby. (A personal aside: ten years later, I became managing editor of LPP -- my most satisfying editorial job.)

 . . . And BNA Thrives
In his book, John discusses several other major product developments. Here are two that contributed greatly to BNA's success:

Tax Management  Even during the legislative and regulatory drought of the Eisenhower years, BNA grew. Still, the company needed a full-blown tax service. Both its major competitors -- Commerce Clearing House and Prentice-Hall -- had comprehensive loose-leaf tax services that were their bread-and-butter foundations. In 1957, BNA met, as John describes him, "a brilliant young tax lawyer, Leonard Silverstein, with an idea." That idea was a service with a series of portfolios, each dealing with a narrow aspect of corporate taxation, and each written by an expert in that specific field.

Silverstein had good connections, especially among tax attorneys on the make who were willing to write treatises on their subjects for $1,000. And so BNA launched its Tax Management service.

Any new service loses money in the first few years. But TM's losses were monumental. By 1962, BNA's gross from all sources was less than $5 million and its investment in TM was close to $1 million. BNA reported its first loss since 1947 -- $138,000.

If BNA had been a publicly-owned company, John notes, pressure from stockholders and outside directors might have been irresistible to throw in the towel. But a majority of BNA's board of directors decided to keep going. BNA's sales reps, who owned lots of stock, loved their commissions from TM.

Tax Management succeeded beyond anyone's dreams, and is today BNA's most profitable service by far.

Environment Reporter  John describes the origins of BNA's pre-eminence in reporting on environment and safety:
Thanks in good part to the foresight and tenacity of one editor, BNA in 1970 staked its claim to dominance in the emerging field of environment and safety regulation. For several years before that, Stan Degler, then a staff member on the Daily Report for Executives, had been pushing for a service on environmental controls. Rachel Carson's Silent Spring had sounded an alarm and it was clear that there was growing public interest in the subject. But a consulting firm engaged to do a a market survey reported that a service wouldn't fly.

Stan kept pushing. Largely on his own time he prepared a mockup of a service to be titled Environment Reporter (ER) along with a draft of promotion materials. He convinced executive editor Ed Donnel and the president [John] to give the go-ahead and the service was a success from the start.
Soon after the launch of ER, Congress passed the Occupational Safety and Health Act (OSHA), and BNA quickly launched the Occupational Safety and Health Reporter. It was an immediate sensation and prospects "literally took it out of the sales reps’ hands," John recalls.

ER and OSHR became the parents of a large number of products for this important niche.

An Aside on Intermarriage at BNA
Writing about these two BNA successes reminds me of BNA's position about two employees marrying: the company cheered! The marriage of Stan and Sandy Degler shows how this can benefit BNA. Sandy became president of Tax Management, and Stan -- until he was promoted to executive editor -- was the associate editor-in-charge of BNA's environment and safety publications.

BNA has seen many marriages between employees. BNA president Paul Wojcik met his wife at BNA, as did I. When my wife and I decided to marry, we wanted to keep it quiet until after the marriage. But we also wanted to take off work on the Monday after our Saturday marriage, since we planned a brief honeymoon in New York City. We each asked our respective supervisors for the time off, told them why and swore them to secrecy.

On Friday, we each received an envelope marked "confidential" in inter-office mail. (Background: we were both active members of the BNA unit of the Newspaper Guild.) Here's the message we found inside our envelopes from John Stewart: “The BNA grapevine, which is more reliable than most, has it that the two of you plan to marry. This is one merger in the labor movement which has the wholehearted approval of BNA's management.”

Which segues into the interesting subject of . . .

BNA and the Newspaper Guild
Earlier, I mentioned that the efforts by the Newspaper Guild to organize BNA's editorial department probably contributed to DL's decision to sell BNA in 1946. Picking up from there….

On the day the new BNA opened for business, the Guild filed a new petition to represent employees in BNA's editorial department. BNA agreed to a consent election, and the Guild won easily. The negotiations for a first contract went on forever since BNA wasn't about to agree to any contract concession that cost money, and was determined not to agree to the Guild's proposal for a union shop.

Thanks to a provision in BNA's bylaws that permitted cumulative voting, the Guild was able to get one of its members -- Bill Raleigh -- elected to the board. Bill turned out to be an excellent board member and was re-elected several times, even after cumulative voting was eliminated. And within a year of being elected to the board, Bill was promoted to management. Similar promotions in later years made it appear that heading up the BNA unit was a sure stepping-stone into management.

After a year of negotiations, BNA and the Guild reached agreement on a contract that did little more than codify the company's salary structure and benefits. Similar impasses plagued subsequent negotiations until BNA agreed that it would reopen and renegotiate the contract… whenever the company really started to make a little money.

When the Korean War boosted business, BNA kept its word and reopened the contract mid-term and agreed to the first-ever general increase. That gesture helped create a climate of mutual trust that lasted through the Eisenhower years.

But always in those negotiations, management reps would remind their union counterparts that the Guild did not represent all of BNA's employees, just the editorial department. Finally in the late 1950's, the Guild unit decided to organize the rest of BNA. The Guild BNA unit was headed at the time by Bill Beltz (later BNA's third CEO, succeeding John Stewart). Bill was a bachelor and a hunk… factors that no doubt helped him sign up many of the women in BNA's clerical support departments.

But Bill was promoted to management in the middle of the organizing drive. I had been unit vice chair, so I took over. I'm sure we lost some of the female votes, but the Guild managed to win the NLRB-conducted election by one vote. (And in line with tradition, I got a management job a year or two later.)

In retrospect, this process weakened the Guild. When it represented only the editorial department, it always had a clear majority of those employees as union members and supporters. I doubt the Guild has ever had such a solid majority in the all-employees unit.

Harris Monroe became the Guild's new business agent in 1961. Harris figured that the only way to stop the decline in union membership was to negotiate a union shop, making Guild membership a condition of employment. BNA's negotiating team (three of whom had been Guild members when employed by DL) said they would never agree to that condition.

Negotiations reached an impasse in 1964, and BNA unit employees took a strike vote. Harris was infuriated when a majority voted "no." A two-year agreement was eventually negotiated which had no provision on the union shop issue.

In the 1966 negotiations on renewal of this contract, agreement was reached on all matters relating to salaries and working conditions. This time, the impasse was on the sole issue of a union shop.

Just as these negotiations were reaching a crisis, a BNA manager took it upon himself to impose some restrictive work rules. That action infuriated many Guild members, and probably helped the Guild win a majority in the strike vote.

On Monday morning, May 9, the Guild set up a picket line. Most of us, management and rank-and-file, didn't think the strike would last more than a week. Although I was a member of management by then, I still had pro-union sentiments. So I got up very early that Monday, determined to avoid crossing the picket line by getting to work very early. Didn't work. I ended up being one of the first to cross the picket line.

To most everyone's surprise, the strike lasted seven months. And even more surprising, it gave rise to name-calling, picket-line scuffles and violence reminiscent of the union-organizing battles in factories.

The Guild called for a boycott of BNA's products that resulted in some loss of business, but not as much as the Guild had hoped for. The Labor Department and the NLRB resisted intense pressure from the Guild and the AFL-CIO to cancel their subscriptions to BNA products.

Also working in BNA's favor was "the outrageously high ratio of supervisors to rank and filers in BNA's editorial department," John said. This went a long way to helping BNA get through the seven-month strike never missing a deadline on any of its publications.

I can attest to this. I was an assistant managing editor on the Labor Relations Reporter at the time. Despite my union sympathies, I knew that my primary allegiance was to BNA. I put in 70-hour weeks during the strike, much of it writing case summaries -- my first job when hired 11 years earlier.

But the Guild's biggest mistake was thinking it could sustain a strike on the single issue of a union shop when all of the other issues already had been settled.

Thomson Tries to Take Over BNA
BNA looked like a plum ripe for the picking in 1982. The stock price was $16. Earnings per share in 1981 were $3.28, a price/earnings ratio of just under 5.

Sure enough, enter the Thomson International Organization, a Toronto-based conglomerate with a string of Canadian newspapers and substantial holdings in North Sea oil. Aware that the oil would not last forever, Thomson decided the most promising investment field was the communications industry, and particularly BNA’s niche.

Through the years, BNA has received many inquiries from take-over suitors. BNA had always replied that its board of directors has adopted a resolution that the company was not for sale. The suitors fade away.

But not Thomson. It eventually offered to buy BNA shares for $45. Soon enough, Thomson increased its offer to $50.

At its annual meeting in April, 1983, BNA's board put the question of continuing employee ownership to a vote of shareholders. BNA had been advised by counsel that it could limit the vote to Class A (active employee) shareholders. But BNA management decided, with some trepidation, to open the vote to Class B (retired) shareholders also, since the resolution was purely advisory.

Both classes gave the resolution a substantial majority. Surprisingly, the favorable percentage among retirees was higher than among the active employees. I talked with several holders of substantial blocks of Class B stock, and they all said about the same thing: they had benefited so much from BNA stock ownership that they couldn't in good conscience deny current employees the same benefit.

Here's John's moral for this chapter in BNA's history:
If you want to fight a hostile takeover, there's no stronger armor than widely diffused employee ownership of your voting stock. It's better than a poisoned pill.
Contrasting the Thomson and Bloomberg Offers
Thomson made its aggressive take-over bid after BNA had said "Thanks, but no thanks" to Thomson's initial overtures. Bloomberg announced its interest in starting a Washington-based operation like BNA's, and then BNA and Bloomberg executives held a series of friendly discussions. The environment was very different from the Thomson case.

Thomson's bid came in 1982 when BNA was at the apex of its "Golden Age" of profitable growth, like our economy generally. Bloomberg's offer came at a time when BNA's revenue had shown little or no growth for about five years, and it was clear that the company needed expensive new information technology.

Now Bloomberg and BNA executives are singing the same tune: "This is a marriage made in heaven."

So, R.I.P employee ownership... but onward and upward, BNA!

11 comments:

Rlstrain said...

Fascinating post, John. I had heard bits and pieces of this history over my time at BNA, and was present for some of it, but this filled in many missing details of the narrative. BNA was a good place to work, and I remember you and many other friends from those days with fondness. Thank you. Bob

NancySW said...

John, beautifully written! Thank you, Nancy

Stan Degler said...

With respect to the 1966 strike, a majority of employees within the Guild jurisdiction, as distinct from Guild membership, opposed the strike. This is proved by the fact that a majority signed a decertification petition to the NLRB. which was withdrawn only after management came to an agreement a agreementag

Stan Degler said...

agreement with the Guild not including a union shop. It also provided for an election within two years, a provision that was never honored by the Guild or BNA.

John said...

Thanks Stan.  Your memory clearly is better than mine.  BTW, JDS's tribute to you in his book was well deserved.

John said...

Thanks Bob. I remember you fondly and our shared struggles. Still in W.VA.? Send me an e-mail at gleeson4@verizon.net when you get a chance.

Susan Carhart said...

Fascinating.  I never knew this part of our history. Thank you, John.

Gerry said...

 


I remember the 1966 striike well.  I'd been back at
McArdle for a month, after serving two years in the US military for my
draft obligation.  After picketing for a few weeks, the Guild
realized that the publications were going out as usual so they decided to put
an unlawful picket line around MPC. 


 


The composing room employees, including me, were all ITU
members, a rather militant group as you mentioned in your blog.  
That morning none of the union members at MPC crossed the line, and Walter
McArdle  frantically tried to get an injunction against the Guild. 
It took Walter a few hours to get the injunction, and by that time everyone was
scattered all over the city, mainly in bars--I was at Matt Kane's an Irish
bar up on 13th Street drinking a beer and eating a hamburger.


 


Once the picket line was withdrawn, the night shift at MPC
went to work, and the Guild action didn't result in any major delay of any
service.  Following the tradition of former union members, I became a
member of BNA's management in 1980.


 


Gerry

John said...

So I had to go through a seven-month strike while you   spent a morning drinking a beer and munching on a hamburger!

Ruth Morris said...

John:  Thanks for your comments about employee-owned BNA.  I must have worked at BNA longer than most of you and reading all of these wonderful names makes me swell with pride, Dean Dinwoodey, John Stewart, Adolph Magidson, Ed Donnel, Dr. Taylor (I did call him Dr.) and on and on...thanks.  Of course, Gus Flather, Jim Rohrbach, Ken Maas, and oh so many others.    I will truly miss not
being a BNA stockholder...so many years, since 1951!!  WOW, I am an old lady!!!  Ruth

John said...

One of the things I'll miss most is the annual shareholders meeting where us old-timers get to see each other again, but all too briefly. Sad to think that last April was the last time I'll hear your "Thank You, BNA" that closes the meeting.

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